EC2 is using virtualisation system, providing the equivalent of a 1.7Ghz Xeon, 1.75GB of RAM and 160GB disk. It would be interesting to know exactly what platform they are using,
I suspect some version of Xen. With a decent generic para-virtualised kernel (as provided by EC2) you can support pretty much any Linux distribution.

With a tool like this I start wondering about the potential uses. Reduce the system by at 25%, install pre-configured asterisk, and you can start selling virtual PBX to groups of people on demand. I wonder if it might be possible to run a full Ubuntu desktop with NX. Suspend and resume your desktop on demand as you travel around the world.

I can see how this project is provide great value to Amazon internally as well. EC2 and S3 combined provided them with a scalable mechanism for providing an internal cost mechanism for managing their sizable investment in infrastructure. They “out-source” the cost of infrastructure internally, fixing the cost of computing. This gives a deterministic method for both production and development groups to plan and scale new projects. With a consistent metric to measure
the cost of computing, developers can instead focus on producing content.

On the other side of the coin it also sends pricing signals to competitors, by dictating the cost of computing and managing the ecosphere it runs within they give themselves a lift ahead of others.